G Model RESPOL-3332; No. of Pages 12 ARTICLE IN PRESS Research Policy xxx (2016) xxx–xxx Contents lists available at ScienceDirect Research Policy journal homepage: www.elsevier.com/locate/respol Innovation and recurring shifts in industrial leadership: Three phases ଝ of change and persistence in the camera industry a b,∗ Hyo Kang , Jaeyong Song a Haas School of Business, University of California, 2220 Piedmont Avenue, Berkeley, CA 94720, USA b Graduate School of Business, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 151-916, Korea a r t i c l e i n f o a b s t r a c t Article history: This study examines factors underlying three phases of change or persistence in industrial leadership Received 31 October 2013 in the sector of interchangeable-lens cameras over the past century. During this period there were two Received in revised form 31 August 2015 major phases of leadership change, both associated with the emergence of innovations involving major Accepted 2 January 2016 discontinuities in the industry’s core technologies. First, Japan won market leadership from Germany in Available online xxx the mid-1960s after commercializing the single-lens reflex (SLR) camera that replaced the previously dominant German rangefinder camera. Second, in the late-2000s, Japanese latecomer firms and a Korean JEL: firm developed Mirrorless cameras, which allowed them to capture the majority of market share from the N70 L63 incumbent Japanese leaders. We also examine the long period (about 60 years) between these two phases O33 of change, during which leading Japanese firms were able to sustain their market leadership despite the digital revolution from the 1980s to 1990s. This paper explores the factors influencing these contrasting Keywords: experiences of change and persistence in industry leadership. The analysis integrates several aspects Catch-up cycle of sectoral innovation systems – i.e., windows of opportunity associated with technology, demand, and Industrial leadership institution – as well as the strategies of incumbents and latecomer firms. The conclusions highlight the Innovation complex and diverse combinations and importance of the factors that help explain the patterns of shifts Interchangeable-lens camera in leadership. © 2016 Elsevier B.V. All rights reserved. 1. Introduction tends to occur repeatedly in many industries; new leaders subse- quently lose the dominant market position to other rising firms. Latecomer firms may have considerable difficulty catching up Although leading firms must have learned from their own expe- with industry leaders. Consumers frequently choose leading firms riences when catching up, they lose their technological edge and with better products, superior resources, and proven capabilities. market competitiveness to challengers, just as former incumbents Incumbent leaders strengthen their dominant position by lever- did before them. Despite the elaborate strategies and actions of new aging their market power and building barriers to entry. Valuable market leaders to satisfy consumers, they often seem powerless to assets resulting from market dominance, such as secure branding, prevent this pattern from being repeated. good reputation, network effects, access to high-level information, We investigate recurrent shifts in industrial leadership and the and slack resources further reinforce their superior position. In this mechanisms behind them in the context of the interchangeable- sense, many researchers and practitioners have emphasized the lens camera industry. In doing so, we look at multiple levels in two importance of market leadership and incumbent advantage. important dimensions of the industry. First, we identify recurrent Interestingly, however, latecomers occasionally surpass incum- shifts in leadership at the firm level – that is, shifts between (a group bents and become new industry leaders. Furthermore, this catch-up of) individual firms, sometimes occurring within economies – and also at the national level. Second, we note that catching up is not limited to explanatory factors relevant at the firm level. Leadership shifts that happen at the national level imply that analyses at the ଝ This research has been supported by the Center for Global Business and Research, firm level cannot be exhaustive, and that broader perspectives and Seoul National University. ∗ multiple levels of analysis are necessary. We therefore examine a Corresponding author. wide range of explanatory factors that contribute to leadership shift E-mail addresses: hyo [email protected] (H. Kang), [email protected] or catch-up and their interactions on different levels.. (J. Song). http://dx.doi.org/10.1016/j.respol.2016.09.004 0048-7333/© 2016 Elsevier B.V. All rights reserved. Please cite this article in press as: Kang, H., Song, J., Innovation and recurring shifts in industrial leadership: Three phases of change and persistence in the camera industry. Res. Policy (2016), http://dx.doi.org/10.1016/j.respol.2016.09.004 G Model RESPOL-3332; No. of Pages 12 ARTICLE IN PRESS 2 H. Kang, J. Song / Research Policy xxx (2016) xxx–xxx In this study, we analyze successive shifts in industrial leader- 2. Theoretical framework ship between countries as well as firms. We examine the influence of technological advances, market demand, government policies, In scrutinizing successive changes in industrial leadership that international conditions, and the interaction between strategies in happened at the firm or country levels, we comprehensively latecomer firms and the responses of leaders. Our cases include identify explanatory factors at various levels. Several fine theo- firms in the camera industry, which has been the focus of sev- ries and frameworks have been developed, such as product cycle eral studies. For example, Wu et al. (2014) examined technological theory (Posner, 1961; Vernon, 1966), sectoral systems of inno- changes in several camera manufacturing companies from the per- vation (Malerba, 2002), patterns of technological catch-up (Lee spective of firm heterogeneity and complementary assets. Their and Lim, 2001), and national innovation systems (Freeman, 1987; focus, however, was on the relationship between complementary Lundvall, 1992; Nelson, 1993). However, given that our study assets and trajectory choices within a firm rather than inter-firm entails both temporal variation (successive leadership shifts) and competition. The growth of Canon and Nikon has been examined, level-of-analysis variation (firm, industry, national, and interna- with a focus on Japan’s support for the optical industry before tional factors), no single theory may be adequate to explain the and during World War II, by Alexander (2002) and Donze (2014), phenomena of interest. respectively. However, the dynamics of innovation and industrial Recognizing a need for a more integrative approach, Lee and leadership, especially between countries, have been overlooked. Malerba (2016) devised a new theoretical framework that cap- To the best of our knowledge, no study has investigated successive tures the various features of dynamic shifts in industrial leadership. changes in industrial leadership in the camera industry within a Their framework consists of two main components: windows of comprehensive analytical framework. In particular, the recent pro- opportunity and strategies of firms. First, they further developed liferation of Mirrorless cameras pioneered by Japanese and Korean the concept of windows of opportunity, building on Perez and latecomers requires elucidation. Soete (1988), as follows. As an industry evolves, one or more of Our focus is on the interchangeable-lens camera industry, which the fundamental components of the sectoral system may change. provides us with invaluable opportunities to examine the mecha- This change paves the way for latecomers to catch up. Three win- nisms behind its recurrent leadership shifts. Three major phases dows of opportunity are proposed in that study: (1) changes in can be identified in its 100-year history. The first notable histori- knowledge/technology, (2) changes in demand, and (3) changes cal event was the development of the 35-mm rangefinder camera in institutions and public policy. The second component that com- developed by German firms in the early twentieth century. This was pletes the framework is firm capabilities and strategies. In dynamic followed by three different technologies or product designs. The industrial environments, firms are actors that compete in the first was the single lens reflex (SLR) camera introduced by Japanese market. In this study, we distinguish the strategies of incumbent firms in the mid-1950s, which captured the major market share by leaders from those of challengers, and discuss strategic interac- the mid-1960s. In turn, this was followed by the development of the tions between them. Windows of opportunity and firm strategies digital SLR (DSLR) camera in the 1980s–1990s by the (then) leading are intimately connected to each other and to the cycle of leadership Japanese firms, which continued to dominate the camera market. shift (or catch-up) in industries. Finally, the Mirrorless camera was developed by other latecomer To facilitate analysis of these two important components of Lee Japanese and Korean firms in the late 2000s, achieving a large mar- and Malerba (2016), we highlight several important concepts about ket share by the mid-2010s despite significant barriers to entry technological change. First, to assess the effects of new technolo- in this industry. These varied episodes